(Update) – Shares of chipmaker Qualcomm (QCOM) sank on Tuesday, along with other chip stocks, as the overall market moved lower due to a hotter-than-expected retail inflation report and rising concerns that the U.S.-Iran ceasefire could break down. Before the drop, Qualcomm had surged more than 60% in just a few weeks, which made the stock more vulnerable to a sharp reversal. However, the pressure on Qualcomm is not just about the market. Tae Kim, author of The Nvidia Way, called Qualcomm the “problem child” of the current chip rally, and argued that the firm’s core business faces real challenges.
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Trade NVDA with leverageHe said that Qualcomm is losing share of Apple’s (AAPL) business, while the Android market remains weak. He also warned that Qualcomm’s Windows processor business could face serious pressure from Nvidia (NVDA), and said the company is relying too much on future hopes around data center AI chips and CPUs. After the recent rally, Kim argued that Qualcomm no longer looks cheap at more than 20 times forward earnings, especially with negative earnings growth ahead.
Nevertheless, the weakness has spread across much of the chip sector, although Nvidia held up better and finished slightly up on the day. Some reports also linked the broader chip selloff to a possible South Korean policy that would tax AI-related profits to fund a “citizen dividend,” which could affect companies like Samsung (SSNLF) and SK Hynix (HXSCL) after their huge AI memory-driven rallies this year.
Is QCOM Stock a Good Buy?
Turning to Wall Street, analysts have a Hold consensus rating on QCOM stock based on nine Buys, 18 Holds, and four Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average QCOM price target of $177.22 per share implies 12.7% downside risk.
